– It’s a bull market alright and last night the S&P 500 made a new all time high and closed at 1733 up 11 points or 0.67%. It had to happen after the market performed so well in the face of a potential default and with liquidity conditions still so fluid (and any chance of the Taper now likely shifted into 2014), what’s to knock the bull market down? The Nasdaq was up 24 points and 0.61%, while the Dow lagged, dragged down by IBM, with a fall of 2 points overnight.
– In Europe it was a sell-the-news move with acute weakness early, but then a recovery into the close with the FTSE finishing up 0.07%. But the DAX, CAC and FTSE MIB (Milan) were down 0.38%, 0.09% and 0.40% respectively. In Spain the IBEX rose 0.39%.
– The US dollar didn’t fare near as well as the S&P or NASDAQ however, which at first blush might seem a conundrum, but traders are clearly thinking thematically overnight. If stocks are up (which they are) and bonds rallied (which they did) and the US dollar was sold off (which it also was), then there’s a clear message in all of this. That is, the cost of $1.5 billion per day of the shutdown and the uncertainty this has injected into the US economic outlook for a while means that The Fed is not going to tighten nor withdraw it’s monetary stimulus any time soon. So selling dollars and buying euros (1.3674, +1.03%), pounds (1.6161, +1.34%), Swiss francs (USDCHF 0.9021) and Aussie dollars (0.9627, +0.81%) is what traders are looking to do. Interestingly – and also along the same theme, USDJOY fell 0.88% to 97.89 in what was a really bad night for the US dollar.
– Closer to home, the SPI 200 on the Sydney Futures Exchange is up 30 points this morning to 5305 bid. The 3- and 10-year bonds rose 3 and 3.5 points each after the US market (10’s) fell 7 points to 2.60%, taking Bunds and Gilts with it to 1.87% and 2.58% respectively.
– Commodities such as Gold and Silver also benefited from the fall in the dollar with Gold up 2.96% to $1319 oz while Silver rose 2.73% to $21.88 oz. Once again this is a Fed liquidity move. Nymex Crude fell 1.56% to $100.69 and looks biased lower. Copper fell 2 cents to $3.28 lb while in the Ag pits, Corn was up 0.17%, Wheat rose 0.66% and Soybeans rose 1.29%.
On the data front, the jobless claims fell 15,000 to 358,000, which is a great number and also helps underpin the stock market rally. While the Philly Fed fell from last month’s print of 22.3, it still printed stronger than expected at 19.8 versus 15.0.
Looking to week’s end, I’m not sure of the new schedule for all of the outstanding data from the US, so watch out for that – even if the data is likely to be discounted due to the shutdown and the impact of same on the economy. Today is a massive day for global markets however, with the release of Chinese GDP at 1pm.